Madras High Court dismisses actor Vijay’s plea against Rs 1.5 crore income tax penalty

The dispute traces back to a search and seizure operation conducted by Income Tax officials at Vijay’s premises on September 30, 2015. During the raid, officers seized documents that, according to the department, revealed income that had not been voluntarily disclosed.

Senior standing counsel for the department, A P Srinivas, told the court that the seized materials showed that the producers of Vijay’s 2015 film, Puli, had paid him Rs 4.93 crore in cash in addition to Rs 16 crore through cheques. Tax Deducted at Source (TDS) had been deposited only for the cheque component and not the cash transaction.

When confronted, Vijay reportedly admitted to receiving Rs 5 crore in cash and agreed to pay the taxes. Subsequently, “to cooperate with the department and resolve the tax issues in an amicable manner,” he agreed to disclose an additional income of Rs 15 crore for the year, including the cash component.

On July 29, 2016, he filed his income tax return for the assessment year 2016-17, declaring a total income of Rs 35.42 crore, which included the additional Rs 15 crore. He also claimed depreciation of Rs 17.81 lakh on assets and sought exemption of Rs 64.71 lakh toward fans’ club expenses.

The department disallowed those claims and, through an assessment order dated December 30, 2017, revised the taxable income to Rs 38.25 crore. The order noted that the additional income would not have been disclosed “but for the search and seizure operation.” Based on these findings, the department imposed penalties under the Income Tax Act.

While Vijay pursued statutory appeals against some components, he challenged the penalty under Section 271AAB(1) through the present writ petition. Vijay’s counsel argued that the penalty proceedings were hit by limitation and should have been initiated on or before June 30, 2019, rather than on June 30, 2022. The limitation period, he contended, ought to run from the date the Assessing Officer referred the matter to higher authorities.

The department countered that the penalty had been imposed strictly in accordance with the Act and that the proceedings fell within the permissible timeframe. It further argued that the disclosure was not voluntary but prompted by the search.

Concurring with the department’s submissions, Justice Ramamoorthy upheld the validity of the penalty order. However, the court left it open for Vijay to challenge the order before the appropriate appellate authority on grounds other than limitation, since those issues were not examined in the writ proceedings.